The potential of embryonic stem (ES) cells to generate any developmental or adult cell type holds much promise for regenerative medicine and in vitro modelling of development and disease. Haematopoietic stem cells (HSCs) regenerate all lineages of the blood throughout adult life and are essential for the treatment of a vast number of haematalogic disorders. Current sources of HSCs for clinical use and research, including adult bone marrow, peripheral blood stem cells and umbilical cord blood, are limited by the number of HSCs they contain and by the availability of a suitable donor. A system that generates a reliable source of HSCs from ES cells would therefore be an ideal alternative. While much progress has been made in the generation of downstream lineages of the haematopoietic system, progress in the derivation of HSCs capable of long-term self-renewal and multilineage reconstitution from ES cells has been limited. Understanding of the developmental steps leading to HSC emergence in the embryo has been advancing in recent years. In particular, precursors of HSCs (preHSCs) have been isolated from the mouse embryo, characterised and matured into HSCs ex vivo using the specialised conditions of aggregate culture systems (Taoudi et al 2008, Rybtsov et al 2011). We hypothesised that application of the aggregate culture system in the differentiation of ES cells could provide a missing link in the in vitro generation of HSCs. Here I have developed a novel ES cell differentiation system that employs the specialised conditions of the aggregate culture system, after an initial stage of mesoderm differentiation. I show that this system creates an environment for efficient haematopoietic and endothelial progenitor formation and generates cells of a preHSC type I (VE-Cadherin+CD45-CD41lo) and preHSC type II (VE-Cadhein+CD45+) surface phenotype. Notably, the system gives rise to cells that achieve low-levels of haematopoietic repopulation in sublethally irradiated NSG mice. The low-level repopulating cells persist for over 4 months in animals and show both myeloid and lymphoid potential. I identify genes that are expressed in cells of a preHSC II surface marker-phenotype from the E11.5 dorsal aorta, but not in cells of this phenotype from the E11.5 Yolk sac or differentiated ES cells. I also show that enforced expression of Notch downstream target Hes1 in Flk1+ mesoderm during ES cell differentiation does not improve levels of ES-derived repopulation.